Asian Currencies Complete Third Weekly Decline on Fed Concern

Asian currencies had a third weekly loss on concern the Federal Reserve will scale back stimulus that has spurred fund flows to emerging markets.

The Bloomberg-JPMorgan Asia Dollar Index touched a six-week low on May 23 after Federal Reserve Chairman Ben S. Bernanke said on May 22 its $85 billion a month of bond-buying, known as quantitative easing, may be tapered if the U.S. economy shows a sustained improvement. The yuan reached a 19-year high yesterday as the central bank set a record fixing even after data indicated manufacturing in Asia’s largest economy will contract in May.

The Asia Dollar Index, which tracks the 10 most-active currencies excluding the yen, fell 0.1 percent this week to 117.32. India’s rupee declined 1.4 percent to 55.6450 per dollar, South Korea’s won dropped 0.9 percent to 1,127.05 and the Philippine peso fell 1 percent to 41.595. The yuan rose 0.17 percent to 6.1316. Financial markets in Thailand and Malaysia were closed yesterday for holidays.

“Investors prefer to hold safer assets after Bernanke’s comments on the QE exit plan,” said Son Eun Jeong, an analyst at Woori Futures Co. in Seoul.

The won had a third weekly decline, the longest losing streak since the period ending March 22. Bank of Korea Governor Kim Choong Soo said yesterday a possible U.S. exit from its stimulus program would cause volatility in other nations. The Dollar Index, which tracks the greenback against the currencies of six major trading partners, touched a 2010 high on May 23.

Chinese Manufacturing

A preliminary reading of the Chinese Purchasing Managers’ Index fell to 49.6 in May, according to HSBC Holdings Plc and Markit Economics on May 23. That compares with the 50.4 median estimate in a Bloomberg News survey. Fifty is the dividing line between expansion and contraction.

The peso completed its biggest decline since the five days ended Aug. 17. The drop is due to “dominant external factors” including the Chinese manufacturing report and the Fed comments, Bangko Sentral ng Pilipinas Governor Amando Tetangco said yesterday.

Chinese Premier Li Keqiang reiterated the country was making progress in opening up its capital account. Industrial and Commercial Bank of China Ltd.’s Singapore branch said on May 23 it will start offering yuan clearing services from May 27. The PBOC raised the daily fixing 0.13 percent to 6.1867 per dollar, a record since a peg to the greenback ended in July 2005.

“The PBOC fixing and more adoption of yuan in offshore markets are positive for the exchange rate,” said Bruce Yam, a foreign-exchange strategist at Sun Hung Kai Financial Ltd. in Hong Kong. “There continues to be capital flowing into China, driving demand for the currency.”

Taiwan Forwards

Taiwan dollar forwards advanced as a plan to cut taxes on stock investments attracted global funds to the island’s shares. Overseas funds sold $32.6 million more local equities than they sold this week through yesterday, taking inflows this year to $4.9 billion, according to exchange data. One-month non-deliverable forwards rose 0.2 percent this week to NT$29.925 per dollar. The spot climbed 0.1 percent to NT$30.03.

Elsewhere in Asia this week, Indonesia’s rupiah dropped 0.2 percent to 9,774 per dollar and Vietnam’s dong fell 0.1 percent to 21,000. Malaysia’s ringgit fell 0.4 percent to 3.033 on May 23 and the Thai baht declined 0.3 percent to 29.95.

To contact the reporters on this story: Fion Li in Hong Kong at fli59@bloomberg.net; Yewon Kang in Seoul at ykang51@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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